Wednesday, June 16, 2004

According to the headline in the New York Times today, "Industrial production surges in May". Or should that be "industrial overproduction"?
Big industry production surged by 1.1 percent in May, the strongest showing in nearly six years, a fresh sign that manufacturers are on a firm recovery path and the national economy possesses good momentum.

The sizable increase reported Wednesday by the Federal Reserve came after a strong 0.8 percent rise in April. The 1.1 percent advance -- better than the 0.6 percent rise that some economists were expecting -- represented the biggest gain since August 1998.

Factory production -- the biggest slice of industrial activity tracked by the Fed -- rose by 0.9 percent in May, up from a 0.7 percent increase the month before.

``They say beauty is only skin deep, but this manufacturing recovery looks better and better the deeper you look at it,'' said Jerry Jasinowski, president of the National Association of Manufacturers. ``There is no doubt that the manufacturing recovery is durable, deep and diffuse,'' he said.
The Federal Reserve report shows that manufacturing production is up 6.4% y-o-y, slightly above the annual gain of the entire industrial sector of 6.3%. Manufacturing capacity growth is far more slack, up just 1.1% on the year, not to mention manufacturing employment which is at -1.2% since last May. So, lots more stuff, with lots less people making it.

It turns out there are lots less people buying it, too. Durable goods production is +6.4% while prices are -3.1%; nondurable non-energy commodity production is +3.2% while prices are -1.1% (price change includes non-food commodities as well; the BLS doesn't provide stats for nondurable non-energy commodities).

Phew! I was briefly seduced by the stagflationistas. Thankfully I've returned to my deflationista senses.


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